Olympia city manager lays out $6.3 million 2026 gap, proposes $1.5 million REET bridge and B&O options

City Manager Jay Birney told the Olympia City Council at a study session Oct. 14 that the city’s initial 2026 operating budget has a $6.3 million shortfall and that he was seeking council direction on revenue options and reductions to produce a balanced budget.

Birney said the staff team is recommending a one‑time use of real estate excise tax (REET) dollars “to cover the first six months of public safety sales tax,” proposing $1.5 million of REET as a bridge because the criminal‑justice approval and subsequent Department of Revenue processing mean public safety sales‑tax receipts may not begin until mid‑2026. “We’re very conservative thinking that we may not start receiving public safety sales tax till mid next year,” Birney said.

Why it matters: the city projects roughly $116 million in general‑fund revenues but classifies about 36% as protected; staff said that leaves about $74 million available for discretionary use. Birney told the council most of the city’s general fund budget is personnel costs (roughly 70 percent), making cuts difficult without affecting people and services.

Revenue and balancing options

Birney and Finance Director Mike Givens presented four B&O scenarios to raise revenue if the council chooses that route. Staff modeled scenarios that vary the rate for commercial classifications and the exemption threshold; staff included the lowest‑revenue scenario in the baseline balancing work.

- Scenario 1 (more equal across categories) was modeled at about $1.5 million in revenue with a $250,000 threshold. - Scenario 2 (same rates but a $500,000 threshold) was modeled at about $1.2 million and was included in the baseline balancing numbers. - Scenario 3 (higher rates for most categories, retail held lower) with a $250,000 threshold would generate roughly $2.1 million. - Scenario 4 (same as scenario 3 with a $500,000 threshold) was modeled at roughly $1.7–$1.8 million.

Council reactions were mixed but several…